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VW Could Move Production Out of Germany if Gas Shortage Persists

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Volkswagen could shift production out of Germany and eastern Europe if a shortage of natural gas persists, the latest sign that the energy crisis unleashed by Russia’s invasion of Ukraine threatens to upend Europe’s industrial landscape.

VW which is Europe’s biggest carmaker, said that moving production was one of the options available for it in the medium-term if gas shortages last much beyond this winter. The automaker has major factories in Germany, the Czech Republic and Slovakia, which are among the European countries most reliant on Russian gas. In a statement, Volkswagen’s head of purchasing, Geng Wu said:

“As mid-term alternatives, we are focusing on greater localization, relocation of manufacturing capacity, or technical alternatives, similar to what is already common practice in the context of challenges related to semiconductor shortages and other recent supply chain disruptions.”

Russia’s decision to throttle gas supplies to Europe has raised concerns that Germany might be forced to ration its fuel. Recent news that gas storage levels hit 90% ahead of schedule has soothed fears of acute shortages this winter, but Germany faces a challenge in replenishing depleted reserves next summer without contributions from Russia.

Related: Glass Shortage- Latest Crisis in Global Automotive Supply Issue

According to a Volkswagen spokesman, Southwestern Europe or coastal zones of northern Europe, both of which have better access to seaborne liquefied natural gas cargoes, could be the beneficiaries of any production shift. The Volkswagen group already operates car factories in Portugal, Spain and Belgium, countries that host LNG terminals.

While saying it had made the “best possible” preparations for gas shortages for this winter, Volkswagen said it was concerned about the effect high gas prices could have on suppliers. Thomas Steg, the company’s head of external relations, commented:

“Politicians must also curb the currently uncontrolled explosion in gas and electricity prices. Otherwise small and medium-sized energy-intensive companies in particular will have major problems in the supply chain and will have to reduce or stop production.”

Source: News 24

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